[OPE] The genocidal implications of biofuels

adsl675281@tiscali.nl

Martin

That is fair comment, but I don't have a really satisfying empirical answer to it yet and I do not know their estimation procedure. But nor does Robert Zoellick by the way, because in his otherwise interesting paper http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:21827681~pagePK:64257043~piPK:437376~theSitePK:4607,00.html he doesn't analyze the effect of price hikes on income distribution, and he doesn't clearly specify what the main sources of price inflation are, its root causes. 

For every price change, political economists know, there are obviously winners and losers in society, but that's precisely where most conventional economists get very vague all of a sudden. Inflation is viewed as just a sort of disease which happens, like the weather, and then you have to deal with that. There is no inkling of a notion that price relationships express power relationships, or, if you like, a balance of forces. 

In Zoellick's model, there are only "producers and consumers" and then you can say that if food and fuel prices rise, this "transfers income from consumers to producers". But that begs your question, insofar as the consumers of food are often also producers of food. So, what kind of producers are there? What kind of consumers? How exactly are they related? What about investors?  What about intermediaries between producers and consumers? Official economics has no answer there, there is just a polite prattling about "producers and consumers".

I've mentioned before on OPE-L how Canadian farmers got mighty slacked off about the fact that, while they were not getting much income from their hard work, agribusiness certainly was. When I was young, very sophisticated critical analyses were made of the political economy of world agriculture, but the discussion has "dumbed down" in recent years, to the point of horrific banalities such as that people in poor countries just have to stop breeding, and then their problems would be solved. 

Abstractly you can say such things as that:

- if the cost of living increases unilaterally, then other things being equal, the additional money needed for consumption is lost to investment, with implications for output growth
- if import costs rise disproportionally to export revenues, this other things being equal reduces national income, again with implications for output growth and investment
- if inflation increases strongly, it cuts into profit income, other things being equal.

Fact is of course that many poor countries cannot even meet all their food needs, and necessarily have to import food, to make up the difference.

Any adequate theory of price inflation would have to start off from the insight that those people or agencies who are in a strong market position (who have a lot of bargaining power) are able to raise prices, whereas those in a weak market position are unable to raise prices, and may in fact be forced to lower their prices. There are price setters, and price takers. The question then arises, who exactly in the current situation is able to raise prices, and why exactly? I think personally this is where the whole discussion gets "dumbed down" - the story is that we just have these forces of supply and demand, and we cannot do anything about them, it's like the weather. Or, in fact, that we should simply submit to these forces of supply and demand, because that will automatically create the best economic result. But if a lot of people literally starve to death, this is a bit difficult to believe.

In bourgeois economics, the way this plays itself out, is in terms of the eternal conflict between free trade and protectionism. If you are in a strong trading position, you argue free trade. If you are in a weak trading position, you argue protectionism. If you are in a "very strong" trading position, you argue for free trade where you want it, and protectionism where you want it. And if you are in a "very weak" position, you will trade on any terms (even "grey" or "criminal" terms). There are, of course, various gradations of argument possible. The economic discussion then focuses on how well we're estimating the trading position, and consequently what the gains and losses of policy will be, viewed explicitly or implicitly from the standpoint of a particular constituency.

Actually, the problems of poor countries usually have little to do with lack of available capital, as Paul Baran - a very bright thinker - already highlighted. They have to do more with, on the one side, social organisation, property rights and customary behaviour, which make it very difficult even to extend credit on any large scale. And, on the other side, with foreigners meddling in their way of life, ostensibly for humanitarian interests, but in reality for self-interested motives and dogmas about what is good for people. 

The only economic policy that truly succeeds, however, is a policy which shows by practical example that people are really better off than they were before, if they adopt that policy, i.e. that it really benefits them and that it is for their benefit, not someone else's. 

If you cannot even articulated clearly and honestly in whose benefit a policy is, you're no further ahead. People are generally very reluctant to drop old modes of cooperation in favour of new modes of cooperation, unless they are convinced that they are truly better off with the new modes of cooperation. You can force a policy on them of course, but then they will resist it and subvert it. 

This being the case, then intellectually speaking you don't just need some empirically well-informed economists to tackle the problems, but also some quality anthropologists, sociologists, geographers, historians, legal people etc. to make a real difference which gets people on side. It is not a question of imposing new ways on the old, but of developing the new ways out of the old ways, building on what people are already doing really well. Almost always, they are already doing some things very well.  

If you cannot even appreciate what people are already doing really well in their circumstances, however crazy those circumstances may seem - perhaps with some imperialist hubris - you are unlikely to succeed with schemes for social and economic betterment. You can waffle a bit about multiculturalism and suchlike, but you are not pooling the strengths that people already have.

Jurriaan

PS - I think there's nothing wrong with biofuels in principle, except that scientists have shown that the wrong species of plants are currently being used for the purpose, in the sense that they produce better results more efficiently. Think of hemp, for example.

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